Nokia’s €800 Million Restructuring Shock Sinks the Stock Even as AI Orders Hit €2.8 Billion

Nokia beats Q2 earnings but shares tumble 5.34% as restructuring costs surge to €800M and free cash flow turns deeply negative, overshadowing AI revenue growth.

Nokia delivered a second-quarter earnings beat on Thursday, but investors barely paused to register the good news before heading for the exits. The stock tumbled 5.34 percent to €8.61, extending a sell-off that has now erased nearly 29 percent of its value over the past 30 days. The culprit: a dramatically expanded restructuring program that has ballooned from €250 million to roughly €800 million, alongside a deeply negative free cash flow that raised questions about the company’s ability to convert its AI boom into actual cash.

The Finnish telecom equipment maker now expects total restructuring costs of around €800 million through 2026, nearly triple its previous estimate. CEO Justin Hotard, who took over from Pekka Lundmark last year, framed the move as a search for “additional productivity gains” as the company pivots toward AI-native infrastructure. Europe is expected to bear the brunt of the cuts, with more than 2,000 jobs potentially affected across multiple sites through early retirement programs and other measures. Nokia itself describes the process as “nips and tucks” — small adjustments with outsized impact.

The restructuring overshadowed what was otherwise a strong quarter. Revenue from AI and cloud customers surged 105 percent year-on-year to €446 million, while new orders from that segment hit €2.8 billion — a record level that the management was quick to caution may not be repeated. “Order patterns in this market are irregular,” the company warned, dampening expectations for a steady stream of similar quarters.

The core networks business also showed signs of life. Network infrastructure grew 12 percent on a currency-adjusted basis, driven by a 20 percent jump in optical networks and a 16 percent gain in IP networks. Comparable operating profit rose 18 percent to €434 million, well above the analyst consensus of roughly €382 million. The comparable gross margin improved by 70 basis points to 46.0 percent, helped by a more favorable product mix and synergies from the Infinera acquisition.

Yet the cash flow picture told a different story. Nokia reported a negative free cash flow of €732 million for the quarter, with the primary drag being a €980 million working capital swing tied to the payout of annual employee bonuses and strategic inventory builds for the expected “AI super-cycle.” A persistent shortage of memory chips has also forced customers to place longer-term orders to secure supply, further tying up cash.

The company nudged its 2026 profit guidance slightly higher, now expecting comparable operating profit between €2.1 billion and €2.6 billion, up from the prior range of €2.0 billion to €2.5 billion. That adjustment, however, is largely technical, reflecting the reclassification of certain businesses as discontinued operations. Nokia is selling its fixed wireless access customer premises equipment unit and is likely to divest its enterprise campus edge business, both previously housed in the portfolio businesses segment.

Technically, the stock is looking bruised. The 14-day relative strength index has dropped to 32.6, approaching oversold territory. The current price of €8.61 sits 26.49 percent below its 50-day moving average of €11.72 and 42 percent below the 52-week high of €14.97 reached in early June. Over the past 12 months, however, the shares are still up 131.81 percent, reflecting the long-term bet on Nokia’s partnership with Nvidia — which invested €1 billion in the company — and its role in developing AI-native 6G networks.

The tension between operational progress and capital absorption remains the defining issue for Nokia’s stock. The AI order book is filling up, but until that translates into positive free cash flow, the market is likely to keep punishing the shares for the costs of transformation.